Accounting for Business Decisions (T2, 2016)

Finance Analysis 11

Accounting for Business Decisions

Coca cola Amatil limited Case study

Contents

3Executive Summary & Introduction

4Introduction

4Statement of Financial Position

6Stockholders’ Equity

7Statement of Profit & Loss

7Statement of Cash Flow

9Conclusion

10Recommendations

12Bibliography

Executive Summary & Introduction

Coca cola Amatil is the leading Australia bottlers of non alcoholic ready t drink product. The company operates in 6 nations which are the Australia, New Zealand, Indonesia, Papua guinea, Fiji as well as Samoa. The company’s diversified portfolio of product entails the carbonated soft drink, spring eater, sport as well energy drinks, fruit juice, iced tea, coffee and many more non alcoholic ready to drinks product. The report will focus examining the financial statement for coca Amatil as well providing an overview of the company’s financial performance for the financial period ending 2015 and making a contrast with the previous year’s performance so as to comprehend the manner to which the company is performing. The report is intended to provide an overview of the financial activity for the company while establishing the finance intricacies that faces the company and consequently providing best advice that the business will adopt to survive in a competitive market. The appraisal will entail the cause analysis of the financial statement for the 2015/14 and providing comprehension of the historic financial performance, the current and the future financial situation of the company is considered to be significant in financial statement analysis for since it may be prepared with assumption that the key impact on financial statement for the company will be similar in the future
(Camerinelli, 2012).

The anticipated financial situation of the company will point out where the business will stand where the financial standing of the company is upheld. The importance of the financial performance comprehension and the provision of advice for coca cola Amatil is that, it will help the business in expanding and investing more in the future. In making a contrast of the 2015.15 financial performances, we will be able to establish the tendency for the financial period ending 2015/14 and be in a position of determining the trend, selecting the appropriate management decision and evaluating the financial performance of coca cola Amatil to guarantee profits and business expansion in the future
(Davies, 2013).

Introduction

Coca cola Amatil is the leading Australia bottlers of non alcoholic ready t drink product. The company operates in 6 nations which are the Australia, New Zealand, Indonesia, Papua guinea, Fiji as well as Samoa. The company’s diversified portfolio of product entails the carbonated soft drink, spring eater, sport as well energy drinks, fruit juice, iced tea, coffee and many more non alcoholic ready to drinks product. The report will focus examining the financial statement for coca Amatil as well providing an overview of the company’s financial performance for the financial period ending 2015
(Hacioglu, 2013).

The report will provide an overview of the financial statement assessment for coca cola Amatil limited for the financial period ending 2015/14, establishing the current financial performance and providing on the best investment verdict that will make the company realize more profits in the future and reduce investment risk. After a comprehensive analysis of the company’s financial performance, it was apparent that the company is investing heavily on capital project because, there is high capital investment as depicted by the amount of cash flows from investing activities, this a determining factor in examining the future financial situation of coca cola Amatil in terms of profitability and expansion
(Henderson, 2015).

Statement of Financial Position

Examining the financial statement for coca cola Amatil is significant because, it will help in appraising the liquidity and profitability situation of the company and providing advice with regards to future financial performance of the company after examining the current and past financial performance (James, 2015). The table below provides the statement of financial position for coca cola Amatil for the period ending 2015/14

a) Total current assets

$ 33,395,000,000

b) Total non-current assets

$ 56,698,000,000

c) Total current liabilities

$ 26,930,000,000

d) Total non-current liabilities

$ 37,609,000,000

e) Total stockholder’s equity

$ 90,093,000,000

Comparison with figures of previous year

a) Total current assets

$32,986,000,000

$ 33,395,000,000

b) Total non-current assets

$ 59,037,000,000

$ 56,698,000,000

c) Total current liabilities

$ 32,374,000,000

$ 26,930,000,000

d) Total non-current liabilities

$ 29,329,000,000

$ 37,609,000,000

e) Total stockholder’s equity

$ 92,023,000,000

$ 90,093,000,000

. (King, 2006). The comparative financial situation for the 2015/14 financial period depict that the company is improving in performance. The impact of the growth in business it that, coca cola Amatil will an effective working capital management due to effective inventory management, debtors and creditors control. The stakeholder’s equity is declining which implies that, the company shifted towards an efficient source of capital such as debt capital which ideal for business growth (Kaoma, 2006)From the table above, it is evident that the total current asset is improving as compared to result of 2014 which depict a 1% growth in total current. Concerning the total noncurrent asset, it can be observed that it is declining with 4% change with previous year’s performance. The total current liability is declining depicting a 30% change as compared to previous year’s performance. The total noncurrent liability is growing which implies 22% growth in growth. The stakeholder’s equity is declining depicting a 2% change as compared to past results

Stockholders’ Equity

The stakeholder’s equity entails the assessment of the company financial performance with regards to capital structure. This implies an approach that the company will use to finance its capital that will lead to optimal capital structure. The stakeholders equity entails the common stock, preferred stock as well as the retained earnings and thus is important in evaluating the financial situation fort coca Amatil since, it aid in provision of understanding of the company’s current financial risk situation and also provision of advice on the recommended capital structure that would lead to high value and low cost of capital to the business (Kaoma, 2006). The table below depicts the shareholders equity for financial period ending 2015/14 for coca cola Amatil.

Total Stockholders’ equity

Common stock

$ 1,760,000,000

$ 1,760,000,000

Additional paid-in capital

$ 13,154,000,000

$ 14,016,000,000

Retained earnings

$ 63,408,000,000

$ 65,018,000,000

Accumulated other comprehensive income

$ (5,777,000,000)

$ (10,174,000,000)

. (Davies, 2013)From the table, it is evident that the common stock is fixed for the financial period 2015/14 while the additional paid in capital improved by 6%. The retained earnings for the business improved by 2% and the accumulated other comprehensive income decline signifying a 43% decline. The comparative financial situation for the period 2015/14 depict that the coco cola Amatil is improving , it can be observed that the company’s ;equity situation is not risky since, the company is making more profits each financial period with increase in paid in capital to finance the daily operations of the business

Statement of Profit & Loss

a) Total (operating) revenues

$ 44,294,000,000

b) Cost of Goods Sold (if relevant)

No relevant

c) Total expenses (before income taxes)

$ 18,084,000,000

d) Any non-operating (or extraordinary) gains and losses

$ 7,366,000,000

e) Earnings per common share

Comparison with figures of previous year

a) Total (operating) revenues

$45,998,000,000.00

$ 44,294,000,000

b) Cost of Goods Sold (if relevant)

Not relevant

No relevant

c) Total expenses (before income taxes)

$18,401,000,000.00

$ 8,084,000,000

d) Any non-operating (or extraordinary) gains and losses

$7,124,000,000.00

$ 7,366,000,000

e) Earnings per common share

. (James, 2015)From the table above, it is evident that the total operating revenue is declining depicting 4% change while the total expense before income taxes is declining depicting a 2% change. The Any non-operating (or extraordinary) gains and losses are growing which depict a 3% change while the earning per share is improving which signify a 4% change. The comparative financial for the company depicts that, the business is improving in terms of business operation since, depict a growing in net income with a drastic decline in total expenses

Statement of Cash Flow

The statement of cash flow is ideal with regards financial performance analysis for coca Amatil since, it helps in provision of an overview of the cash flows management in terms of cash inflows and outflows. This is significant in evaluating the cash inflows and outflows in the company and providing the best recommendation that managment cash and to ensure that there is effective cash flows management. This will be significant because, ascertaining the cash flow for the business will help in advising the company on the ideal cash flow control that will guarantee that business incur less cash outflow while ensuring that there is more of cash inflows (Kaoma, 2006). To better get an understanding go the company’s cash flow control,, we will perform the comparison of the cash flow statement for the financial period 2015/14 in to get an understanding of the cash is spent in the company and whether there is effective cash flow control. The following is the table of cash flow statement for coca cola Amatil limited for the period 2015/14.

a) net cash inflow (outflow) from operating activities

$ 10,615,000,000

$ 10,528,000,000

b) net cash inflow (outflow) from financing activities

$ (3,631,000,000)

$ (5,113,000,000)

c) net cash inflow (outflow) from investing activities

$ (7,506,000,000)

$ (6,186,000,000)

d) net increase (decrease) in cash during the year

$ 8,209,000,000

$ 7,975,000,000

The table above depict that the net cash inflows from operating activities is declining while the net cash flow from financing is activities is growing. The net cash flow from investing activities and net decrease in cash during the year is declining. The cash situation for the business depict that the company is id having more of cash flow from investing and financing activities which would imply that there is business growth in coco cola Amatil limited and hence an indication that the future business situation for the company is ideal which attract investors into the company as a result of capital growth. The general overview with regards cash flow control for the company is that there is more cash flow invested in financing and investing activities and thus the company will grow in the future. Because the company is growing each year, there is need to guarantee that there is enough cash to funds the capital project and hence, working capital management is recommended to finance the daily operations of the business
(Damodaran, 2010).

Conclusion

It can therefore be concluded that the coca cola Amatil limited is experiencing business expansion as a result of high investment in capital project and increase in debt source of capital. Effective management of cash flows is therefore recommended in order to ensure that the liquidity situation of the company is not risky as well as there is effective working capital management to finance the daily operations of the business as the company grows in terms of capital investment project. The financial statement is an important tool for evaluating the company past, current and future performance. The link between the past and future financial situation of coca cola Amatil depict that a steady financial situation in the past will judgment the manner to which the company perform in the future. This is due to the fact that, an investors and the company administration depends on the financial performance of the company , both for the current and the past to ascertain future financial performance of the company and makes an investment decision on whether to i9vnest on the company or not.

Recommendations

We recommend that the company should ensure that there is effective working capital management as well as managing the cash flows in order to encourage business growth, reduce liquidity risk as well as encourage more investors into the company. Since, coco cola Amatil is a capital intensive company, there is need to ensure that the cheapest source of capital such as debt, is used to ensure that there is low cost on capital and high value to the company. The company must cut on unnecessary cost and improve on revenue collections since; it is evident that there is high capital investment. To reduce risk, there is need to hold diversified portfolio in order to minimize risk and maximize high returns on risk portfolio.

Bibliography

Camerinelli, E. (2012) Measuring the Value of the Supply Chain: Linking Financial. — Page 19.

Damodaran, A. (2010) Applied Corporate Finance — Page 552, New York: Cingage Learning.

Davies, H. (2013) Global Financial Regulation: The Essential Guide.

Ehrhardt, M. (2008) Corporate Finance: A Focused Approach — Page 554, london: Cingage Learning.

Hacioglu, Ü. (2013) Managerial Issues in Finance and Banking: A Strategic Approach, London: Cingage Learning.

Henderson, S. (2015) Issues in Financial Accounting — Page 991, London: Cingage learning.

James, W. (2015) Financial & Managerial Accounting — Page 992, London: John Wiley.

Kaoma, K. (2006) Legal Aspects of Financial Services Regulation .

King, A. (2006) Fair Value for Financial Reporting: Meeting the New FASB Requirement, London.

Otley, D. (2013) Accounting for Management Control — Page 493, London: Cingage Learning.

Shi, J. (2001) Handbook of Financial Analysis, Forecasting, and Modeling — Page 311, London.

William Petty, ‎.T. (2015) Financial Management: Principles and Applications — Page 705, London: Springer.